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Before we make it in America, we have to rebuild America

Date Posted: October 1 2010

Almost two years ago, conservative members of Congress, and their sycophants in the media (or, should I say the conservative media and their sycophants in Congress) set about on a tirade over President Obama’s proposal to provide federal monetary assistance to rescue General Motors and Chrysler. In truth, the assistance provided by the federal government actually began with the Bush Administration – but conservatives are never ones to ever let facts get in the way of their seemingly endless quest to demonize President Obama.

FoxNews’ commentator Sean Hannity probably captured the conservative sentiment best when he exclaimed, “The Obama administration is pushing the single biggest power grab and move towards socialism in the history of the country.”

And the instinctual anti-union, low-wage philosophy of conservative Republicans was spelled out clearly in a December 2008 “Action Alert” that was sent to GOP senators on the proposed bailout of the U.S.-based auto firms. That Alert read, in part: “Republicans should stand firm and take their first shot against organized labor.” Clearly, despite their harsh criticisms of the Big 3 CEOs, conservative Members of Congress saw an opportunity to rid this nation of the United Auto Workers and, more broadly, working people’s economic and political gains won through unionization.

Interestingly enough, the Republicans’ fusillade against the “auto bailout” was also spearheaded by self-interested southern senators to promote the cause of Japanese and German auto “transplants” that operate throughout the southern United States.

The stance taken by these Republicans was remarkable in its consistent hypocrisy on key matters of principle. Because on the one hand they stand up in Washington, DC and decry the “socialist” intervention of the federal government into the workings of the free market; while back home they have supported vast injections of government subsidies into the foreign-owned firms operating in their states.

For example, in Tennessee, Senator Bob Corker (when he was Mayor of Chattanooga, TN) engineered the courtship of Volkswagen that resulted in almost $600 million in taxpayer-funded incentives being packaged together and given away to the German auto giant in exchange for it locating and building its new manufacturing plant in Chattanooga. And most notably, the memorandum of understanding between Tennessee and VW explicitly excluded any form of “local hire” mandate for the construction of that plant.

As a result, the initial construction phases of that facility was dominated by out-of-state contractors and workers, along with the importation and utilization of foreign workers from Europe, and undocumented Latino workers, at the expense of Tennessee contractors and skilled workers who were salivating at the chance to secure some of that work. But thanks to the aggressive educational efforts of local citizens and activists, a lot of that work has subsequently turned around and gone towards Tennessee contractors and workers.

In other states, the hypocrisy was just as striking.

Senator Richard Shelby (R-AL) strenuously opposed any aid to the U.S. automakers despite the three million jobs at stake, as estimated by the Economic Policy Institute. He suggested that the Big 3 be allowed to go under, with the slack picked up by foreign-owned transplants like those who dot his state. “Companies fail every day and others take their place,” declared Shelby. “There’s not a bank in the country that would loan a dollar to these companies.”

But when it comes to the nonunion auto plants in his home state, Shelby would do more than “loan a dollar” to them; he has favored enormous subsidies to insure their success. Most infamously, when German-based Daimler received about $250 million from Alabama, the subsidy for luxury car production was so generous it nearly caused a raid on the state’s fund for education, where the state has disastrously lagged for decades. Honda and Hyundai each also hauled in $250 million from Alabama taxpayers. Other senators involved include:

  • Senator Mitch McConnell (R-KY) was outspoken in his opposition to support for the U.S. auto industry: “Government help is not the only option. It’s not even the best option.” McConnell, however, has been strangely silent on the issue of $371 million in Kentucky state subsidies being given to Toyota since 1986.
  • Senator Thad Cochrane (R-MS) complained heartily about the bailout, while neglecting to mention that he has supported his state in providing $650 million to Toyota and Nissan.
  • And Senator Jim DeMint (R-SC) flatly pronounced, “Government should not be in the auto industry.” Except, apparently, when his impoverished state scrapes together $230 million to subsidize luxury carmaker BMW.

By trying to deny government aid that would sustain GM and Chrysler, the Southern Republicans ignored the needs of their constituents. If GM, for example, went out of business, Kentucky, Alabama, Georgia, and Tennessee all stood to lose 20,000 to 29,400 jobs each, according to Economic Policy Institute estimates.

And yet, here we stand almost two years later, and an August 13, 2010 article in the Washington Post reports that “…GM has just announced its biggest profit in six years, a $1.3 billion turnaround quarter as the nation’s top automaker prepares to pay back the government’s $51 billion bailout a little more than one year after emerging from bankruptcy.”

And that’s not the only good news from the auto industry. In July, Ford announced a $2.6 billion profit for the second quarter – its fifth straight quarterly profit. And Chrysler reported a 2010 first quarter operating profit of $143 million. Exports of vehicles and parts from January to May 2010 increased by 57% over the same period one year ago.

“In the year before the bankruptcies, these companies lost almost 340,000 jobs,” said Ron Bloom, a senior advisor to Treasury Secretary Timothy Geithner. “In the year since then, 55,000 jobs have been added into these companies; if we hadn’t stepped in when we did, most observers believe at least a million jobs would have been lost.”

And it bears mentioning that thousands of those jobs belonged to the skilled craft professionals of America’s Building Trades Unions that conduct maintenance on the manufacturing plants.

Recently, President Obama and the Democratic Congress have continued their focus on America’s manufacturing sector, and rightly so. A vibrant healthy America, where American workers are once again manufacturing products here in America, is a key to our long-term economic prosperity. This is especially true in light of how the number of American workers involved in manufacturing is at its lowest point since 1941. And since December , 2007, our nation has lost 16 percent of its manufacturing jobs.

The American manufacturing sector is an important component for capital investments, product research and development, and our balance of trade. As we take steps to rebound from the disastrous economic straits we find ourselves in today, it is critical that we focus on re-balancing our economy away from one that is consumption-oriented, to one that is focused upon capital investments and exports. Tax rebates may have been appropriate in the past for an economy entering a standard cyclical downturn, but what we find ourselves in today is NOT a normal business recession. It is a post-bubble slowdown involving a painful de-leveraging of America’s household and financial sectors. A longer-term economic recovery program must therefore steer our nation on a path that is less-dependent on consumption, and more-dependent upon our enormous infrastructure needs and the potential global demand for American technology and products created by the drive for efficiencies in developing nations around the world.

The new “Make it in America” initiative launched by House Democrats to increase American manufacturing and create new American jobs is a laudable program, but it is an incomplete remedy for what ails the American economy. What is needed in advance of a “Make it in America” initiative, is a “Build America” initiative.

Transportation accounts for up to 14 percent of the final price of a product, depending on the commodity and distance to be moved. In addition, support industries spring up around new infrastructure, generating both jobs and revenues –  e.g., the development around new airports; roadside amenities along any new highway, or truck or rail depot. However, if the supply of roads, railways, ports and inter-modal facilities does not keep up with rising demand, congestion, air pollution and the cost of moving goods will increase, with a downward pressure on profits and growth. The same is true with other types of infrastructure – such as broadband availability and an upgraded energy grid.

America was the first to put a man on the moon and to build a super-highway system. But today, we can no longer be assured of transporting products efficiently, or of crossing bridges safely or protecting our families from failing dams or levees.

Effective infrastructure in the transportation sector has a huge impact on our overall way of life, not to mention business profitability as it relates to production, distribution, trade and the sale of physical goods. In short, it is one of the leading sources of the economic growth of regions and nations. Not only that, but infrastructure investments are an effective source of job growth, not to mention a proven economic accelerator.

The construction industry drives the American economy, typically accounting for 5 percent of our nation’s gross domestic product. But with almost 2 million construction workers currently jobless, it is an industry in crisis. We can build America by investing in the fundamentals of the country and quickly create millions of good jobs that will get the economy back on track. The American Recovery and Reinvestment Act created several hundred thousand construction jobs by investing more than $100 billion in America’s basics.

That was a start. But, with current needs for our transportation, energy and public education facilities now estimated at $2.2 trillion, the recovery plan was only a down payment. Much more is needed to help us compete globally and to build America, so America works. Public works projects are tried and true job creation vehicles – every billion dollars in federal transportation investment supports roughly 40,000 jobs. And for every $1.00 invested in infrastructure projects, approximately $1.60 of economic activity is created. Construction jobs are good jobs, providing paychecks that circulate throughout local communities helping those hardest hit by the economic crisis.

The American public strongly, and rightfully so, supports a renewed focus on American manufacturing. This effort builds on House Democrats’ actions since the start of this current recession to create jobs and lay the foundation for a strong economy. But in order to “Make it in America” we first have to “Re-build America.”